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Commercial Real Estate Glossary

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Essential commercial real estate (CRE) terms include financial metrics like Net Operating Income (NOI) (income minus expenses), Capitalization Rate (Cap Rate) (return on investment), and Cash-on-Cash Return. Key leasing terms are Base Rent, Common Area Maintenance (CAM) charges, and Triple Net (NNN) leases, where tenants pay taxes, insurance, and maintenance.

Categorized into: Financial & Investment Terms, Leasing & Rent Terms, Property & Market Terms, and Loan & Transaction Terms

Commercial Real Estate Glossary

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1. Equity REIT

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Financial Advisor, Accountant, CPA, Tax attorney.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.

2. Tax Advisor

A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Financial Advisor, Accountant, CPA, Tax attorney.

3. Encumbrance

A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.Financial Advisor, Accountant, CPA, Tax attorney.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

4. Real Property

A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.Financial Advisor, Accountant, CPA, Tax attorney.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

5. Mechanic's Lien

A claim created by state statutes for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure, and which attaches to the land as well as to the buildings and improvements thereon.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Financial Advisor, Accountant, CPA, Tax attorney.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

6. Quitclaim Deed

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Financial Advisor, Accountant, CPA, Tax attorney.A deed operating as a release that is intended to pass any title, interest, or claim that the grantor may have in the property, but not containing any warranty or professing that such title is valid.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

7. Cancellation Clause

A provision in a contract (e.g., lease) that confers the ability of one in the lease to terminate the party's obligations. The grounds and ability to cancel are usually specified in the lease.Financial Advisor, Accountant, CPA, Tax attorney.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

8. Cash (or Funds) Available for Distribution

Cash (or Funds) available for distribution (CAD or FAD) is a measure of a REIT's ability to generate cash and to distribute dividends to its shareholders. In addition to subtracting from FFO normalized recurring real estate-related expenditures and other non-cash items to obtain AFFO, CAD (or FAD) is usually derived by also subtracting nonrecurring expenditures.Financial Advisor, Accountant, CPA, Tax attorney.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

9. Class A Building

Class A Building classification system; defined by BOMA as the most prestigious buildings competing for premier office users with above average rental rates for the area along with high-quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.Financial Advisor, Accountant, CPA, Tax attorney.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

10. Absolute Net

A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Lease requiring tenant to pay in addition to base rent all costs associated with the operation, repair and maintenance of the building, all real estate taxes, and utilities including repair and maintenance of the building's structure and roof. Often the tenant is directly responsible both for all such costs and for the active handling of the items themselves. Distinguished from Triple Net (see below) by tenant's responsibility for maintenance and repair of the building structure and roof.Financial Advisor, Accountant, CPA, Tax attorney.

11. Bullet Loan

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Any short-term, generally five to seven years, financing option that requires a balloon payment at the end of the term and anticipates that the loan will be refinanced in order to meet the balloon payment obligation. Essentially, should the refinancing not be available, often due to the property not performing as anticipated, the borrower is 'shot' and the property is subject to foreclosure. An example of this is when a developer borrows to cover the costs of construction and carry-costs for a new building with the expectation that it would be replaced by long-term (or 'permanent') financing provided by an institutional investor once most of risk involved in construction and lease-up had been overcome resulting in an income-producing property.Financial Advisor, Accountant, CPA, Tax attorney.

12. Lessor

Financial Advisor, Accountant, CPA, Tax attorney.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).An individual (i.e. landlord) who rents property to a tenant via a lease.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

13. Unencumbered

14. Urban Property

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Financial Advisor, Accountant, CPA, Tax attorney.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Property in a city or a high-density area.

15. Base Rent

A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Financial Advisor, Accountant, CPA, Tax attorney.The asking price for the space itself, not including any taxes, maintenance, insurance, or any type of financed money that may be used for buildout. The Base Rent is a set amount used as a minimum rent in a lease with provisions for increasing the rent over the term of the lease. For more information, go to 'Escalation Clause', 'Operating Expense Escalation' and 'Percentage Lease'.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

16. CAM

CAM is an acronym for 'Common Area Maintenance'. In commercial real estate many leases require the tenant to pay a portion of CAM fees. In addition to Base Rent, CAM fees are the amounts charged to tenants for expenses for the maintenance of the property's 'common area,' such as its entryways, hallways, restrooms, parking lots, and other Common Areas.Financial Advisor, Accountant, CPA, Tax attorney.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

17. Representation Agreement

Financial Advisor, Accountant, CPA, Tax attorney.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation. For more information, go to 'Exclusive Listing Agreement'.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

18. Dedicate

A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Financial Advisor, Accountant, CPA, Tax attorney.To appropriate private property to public ownership for a public use.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

19. Building Standard Plus Allowance

A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).The landlord lists, in detail, the building standard materials and costs necessary to make the premises suitable for occupancy. A negotiated allowance is then provided for the tenant to customize or upgrade materials. For more information, go to 'Workletter'.Financial Advisor, Accountant, CPA, Tax attorney.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

20. Dwelling, Single-family

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Financial Advisor, Accountant, CPA, Tax attorney.Dwelling, single-family, typically means a detached dwelling designed for occupancy by only one family.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

21. Building Permit

22. Ad Valorem

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).According to value. This is a tax imposed on the value of property (references a general property tax), which is typically based on the local government's valuation of the property.Financial Advisor, Accountant, CPA, Tax attorney.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).

23. Agency

Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter. Agency involving real property should be in writing, such as listings, trusts, powers of attorney, etc.Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Financial Advisor, Accountant, CPA, Tax attorney.

24. Deed

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).Financial Advisor, Accountant, CPA, Tax attorney.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).A legal instrument transferring title to real property from the seller to the buyer upon the sale of such property.

25. Standard Lease Form Agreement

Financial Advisor, Accountant, CPA, Tax attorney.The standard lease that every landlord has prepared for any commercial property up for lease. Terms and language may differ from property to property, landlord to landlord, but remain very similar in structure.A REIT which owns, or has an 'equity interest' in, rental real estate (rather than making loans secured by real estate collateral).Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

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25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

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All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

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Without work one finishes nothing. - Ralph Waldo Emerson
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